10/06/2009
If improved US ethanol profit margins keep their momentum into 2010, the amount of corn used for ethanol looks likely to take a significant jump, according to new analysis from Rabobank Agri Commodity Markets Research. Rabobank said if US ethanol production stays at its current 11.5 billion gallons, corn usage for ethanol will increase from about 3.7 billion bushels in 2008-2009 to around 4.3 billion bushels in 2009-2010. “Industry sources indicate that capacity utilization has improved substantially in recent months and mothballed plants are gradually being brought back online,” said the Rabobank report. “In addition, construction projects for new plants that had been abandoned are being resurrected, with 15 new or expanded plants due to come on line over the coming marketing year.”
Estimates from the Renewable Fuels Association are that about 1.5 billion gallons of new production capacity is set to come on line and create extra demand for about 555 million bushels of corn, according to Rabobank. “While we believe that realizing this extra capacity and corn demand is still uncertain, it does demonstrate the demand potential that exists should ethanol margins remain positive,” the report said. The study said that though there are many other variables that drive for grains, “improved biofuel demand will help limit downside price potential and establish a floor for prices above long-term averages.”